Important Tax Law Changes You Need to Know [ Updated for 2018]

Getting psyched to do your taxes? I suppose if you're expecting a refund you might be.

Or if you're kind of a tax nerd like me, you might take some pleasure in breaking down the tables and watching the software do its thing. Or you might be interested to see how the recent Tax Cuts and Jobs Act of 2017 will affect your tax burden.

In any of these cases, here are the tax law changes that apply to the 2018 tax year. Please note, these are the changes that affect your 2018 taxes, not the taxes you paid in 2017.

2018 Tax Law Changes

Let's start with the U.S. federal income tax brackets. Though the tax bill was unable to reduce the number of tax brackets from seven to four, as was originally proposed, it does offer mostly lower tax rates for many filers:

Tax Rate

Married Filing Jointly

Most Single Filers

10%

$0-$19,050

$0-$9,525

12%

$19,051-$77,400

$9,526-$38,700

22%

$77,401-$165,000

$38,701-$82,500

24%

$165,001-$315,000

$82,501-$157,500

32%

$315,001-$400,000

$157,501-$200,000

35%

$400,001-$600,000

$200,001-$300,000

37%

$600,001+

$300,001+

In addition, here are the other important changes that will most likely affect your taxes:

The increase in the standard deduction comes along with a repeal in personal and dependent exemptions. In 2017, that exemption was worth $4,050.

The child tax credit has doubled from $1,000 to $2,000, and the amount of the credit that is refundable has increased to $1,400. The phaseout threshold has gone up from $110,000 to $400,000 for married couples filing jointly, and from $75,000 to $200,000 for single filers.

The maximum earned income tax credit rose to $6,444, and the maximum income limit for the credit rose to $54,998.

The foreign earned income exclusion remains the same 2017 amount of $102,100.

The standard mileage rate you can expense if you use your car for business has gone up to 53.5 cents per mile.

More Details About 2018 Tax Law Changes

The Tax Cuts and Jobs Act of 2017 has repealed the tax penalty associated with the Affordable Care Act (aka Obamacare), which means that people who do not buy health insurance will not longer pay a tax penalty. However, this change does not officially go into effect until 2019, so the tax penalty may still be assessed for calendar year 2018.

Increased Standard Deduction – For the tax year 2018, the standard deductions for all peeps have been upped to almost double the 2017 rates. This means the standard deduction will apply for many more taxpayers:

Married filing jointly is $24,000

Single is $12,000

Head of household is $18,000

The Saver's Credit AGI Was Increased Again – They keep making this saver's credit easier and easier to get into. The adjusted gross income (AGI) limits are now:

Married filing jointly is $63,000

Head of household is $47,250

Single filers is $31,500

Nice that they keep making it easier for folks to save through this credit. I'd love to see stats on the number of people using this credit.

Alternative minimum tax (AMT): This was originally implemented to help ensure that high-income Americans paid a fair share of taxes, no matter how many deductions they could claim. This meant that high-income households have to calculate their taxes twice: once under the standard tax system, and once under the AMT system. However, the AMT was not adjusted for inflation, so it was applying to more and more people over the years.

The new tax bill has permanently adjusted AMT for inflation, and has made the AMT amount significantly higher in 2018. The exemption amount for tax year 2018 has risen from $84,500 to $109,400 for married couples filing jointly and from $54,300 to $70,300 for individuals.

Last Edited: February 2, 2018 @ 5:56 pmThe content of ptmoney.com is for general information purposes only and does not constitute professional advice. Visitors to ptmoney.com should not act upon the content or information without first seeking appropriate professional advice. In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.

About Philip Taylor

Philip Taylor, aka "PT", is a CPA, financial writer, podcaster, FinCon Founder, husband, and father of three. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or Google+. Listen to the new podcast, Masters of Money!

About PT

Hi, I'm Philip Taylor. I'm a husband, father, blogger, CPA, and entrepreneur. I love learning to do more with my money and sharing it all here with you. Join in on the conversation and start improving your financial life today. Read more...

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The content of ptmoney.com is for general information purposes only and does not constitute professional advice. Visitors to ptmoney.com should not act upon the content or information without first seeking appropriate professional advice.